Private Equity Fund Accounting – Journal Entries & Practical Guide by Shivraj (Private Equity Accountant)
- Shivraj D
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Private Equity Fund Accounting – Journal Entries & Practical Guide by Shivraj (Private Equity Accountant)
🏦 Fund Name: GMT LP Fund
This guide captures every crucial accounting entry a Private Equity Fund Accountant must know. Every entry is followed by my practical view, so it’s not just theory—it’s experience talking. Let’s go!
🔹1. Capital Commitment
Entry: No entry at commitment stage, but disclosed off-balance sheet.
📝 Shivraj’s View: This is just a promise by LPs. It’s tracked in capital commitment schedules, not books.
🔹2. Capital Call – When Called from LPs
Entry:
Dr. LP Capital Receivable ₹X
Cr. LP Capital Commitment ₹XThis sets up the receivable from LPs.
When money is received:
Dr. Bank ₹X
Cr. LP Capital Receivable ₹X📝 Shivraj’s View: You always need to match this to capital call notices sent to LPs.
🔹3. Underpaid Capital Call
Entry:
Dr. LP Capital Receivable (Balance) ₹X
Cr. Suspense / AR Aging ₹X📝 Shivraj’s View: Track and follow up with LP. Disclosure important if amount is material.
🔹4. Overpaid Capital Call
Entry:
Dr. Bank ₹X
Cr. LP Advance / Liability ₹X📝 Shivraj’s View: Either adjust in next call or refund. Ensure reconciliation monthly.
🔹5. Management Fees Paid from Capital Call
Entry:
Dr. Management Fees Expense ₹X
Cr. Bank ₹X📝 Shivraj’s View: If paid upfront, also consider prepaid treatment for period.
🔹6. Management Fees Accrued (Monthly/Quarterly)
Entry:
Dr. Management Fees Expense ₹X
Cr. Accrued Expenses / Payable ₹X📝 Shivraj’s View: Match fee period; key for accurate NAV and P&L.
🔹7. Prepaid Management Fees
Entry:
Dr. Prepaid Fees ₹X
Cr. Bank ₹XLater amortization:
Dr. Management Fees Expense ₹X
Cr. Prepaid Fees ₹X📝 Shivraj’s View: This helps match expense to performance.
🔹8. Direct Payment by LP (Without Coming into Fund)
Entry: Disclosure only, not in Fund’s books directly.
📝 Shivraj’s View: Important to track for commitment and reporting, but not in cash flow.
🔹9. Income – Dividend Received
Entry:
Dr. Bank ₹X
Cr. Dividend Income ₹X📝 Shivraj’s View: Classify separately; track per investment.
🔹10. Income – Interest Earned
Entry:
Dr. Bank / Accrued Interest ₹X
Cr. Interest Income ₹X📝 Shivraj’s View: Great for debt investments. Separate accrual vs cash.
🔹11. Other Income / FX Gain / Misc
Entry:
Dr. Bank / Receivable ₹X
Cr. Other Income / FX Gain ₹X📝 Shivraj’s View: Helps boost IRR. Tag each income source clearly.
🔹12. Accrued Income (Not Yet Received)
Entry:
Dr. Accrued Income ₹X
Cr. Income (Div/Int) ₹X📝 Shivraj’s View: NAV impact is real even without cash.
🔹13. Excess Income Received
Entry:
Dr. Bank ₹X
Cr. Income ₹X
Cr. Advance Income / Suspense ₹X📝 Shivraj’s View: Reclass after verification. Often happens near exit or coupon reset.
🔹14. Income Posted to Wrong Account
Entry:
Dr. Wrong Account ₹X
Cr. Correct Account ₹X📝 Shivraj’s View: Track audit trail; highlight in notes.
🔹15. Investment Valuation Gain
Entry:
Dr. Investment (Fair Value Adj.) ₹X
Cr. Unrealised Gain – P&L / NAV Adj. ₹X📝 Shivraj’s View: This is key to NAV build-up. Match fund policies (IFRS, US GAAP).
🔹16. Investment Write-Down / Write-Off
Write-Down:
Dr. Unrealised Loss / NAV Adj. ₹X
Cr. Investment (Fair Value) ₹XWrite-Off (No Recovery):
Dr. Realised Loss / Expense ₹X
Cr. Investment (Full Value) ₹X📝 Shivraj’s View: Valuation notes should support these; always have audit backup.
🔹17. Portfolio Rebalancing
Entry: Transfer between portfolios
Dr. Investment B ₹X
Cr. Investment A ₹X📝 Shivraj’s View: NAV-neutral but monitor for IRR impact.
🔹18. Management Fees Holdback
Entry:
Dr. LP Capital Receivable (Gross) ₹X
Cr. LP Capital Commitment ₹X
Dr. Holdback Reserve ₹X
Cr. Payable to GP / Mgmt Co. ₹X📝 Shivraj’s View: Useful when final NAV is uncertain.
🔹19. Reversal of Accrual or Prepaid
Accrual Reversal:
Dr. Accrued Expense ₹X
Cr. Expense ₹X📝 Shivraj’s View: Always cross-check with final invoice or settlement.
🔹20. Performance Fee / Carried Interest
Entry (Accrual):
Dr. Performance Fee Expense ₹X
Cr. Payable to GP / Carried Interest ₹X📝 Shivraj’s View: Based on waterfall and hurdle model. Always audit trail ready.
🔹21. Waterfall Distribution to GP/LP
Entry:
Dr. Capital / Retained Earnings ₹X
Cr. Bank (LP/GP Distribution) ₹X📝 Shivraj’s View: Follow exact logic—return of capital, preferred return, then carry.
🔹22. Catch-Up Fee to GP
Entry:
Dr. Income or Gain Reserve ₹X
Cr. Payable to GP (Catch-Up) ₹X📝 Shivraj’s View: Apply when GP hasn’t received fair share earlier.
🔹23. Offsets / Set-Off Between Fees and Distributions
Entry:
Dr. Payable to GP (Carry/Fee) ₹X
Cr. Distribution Payable to GP ₹X📝 Shivraj’s View: Netting saves time but needs disclosure.
🔹24. Bonds – Amortisation of Premium/Discount
Entry:
Dr. Interest Income / Amort. Exp. ₹X
Cr. Investment in Bond ₹X📝 Shivraj’s View: Monthly amortisation as per bond schedule.
🔹25. Underwater Capital Call (NAV Negative)
Entry:
Dr. LP Capital Receivable ₹X
Cr. LP Capital Commitment ₹X
(Then)
Dr. Bank ₹X
Cr. LP Capital Receivable ₹X📝 Shivraj’s View: Happens when fund NAV drops and more funds are called. Sensitive; communicate clearly to LPs.
🔹26. Capital Distribution to LPs
Entry:
Dr. Capital / Retained Earnings ₹X
Cr. Bank ₹X📝 Shivraj’s View: Ensure capital balance and IRR schedule updated after every dist.
🔹27. Dividend / Interest Distribution to LPs
Entry:
Dr. Retained Earnings / Income Reserve ₹X
Cr. Bank ₹X📝 Shivraj’s View: If income-based distribution model, use exact split by share class or ownership.
✅ Hope this journal entry guide helps new fund accountants and those preparing for interviews or NAV audit.
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